Preliminary Final Results

RNS Number : 3216P

Sabien Technology Group PLC

01 October 2013

 



1 October 2013

Sabien Technology Group Plc

("Sabien", the "Company" or the "Group")

Preliminary results for the year to 30 June 2013

Sabien Technology Group Plc, the manufacturer and supplier of M2G, a boiler energy efficiency technology, is pleased to report its preliminary results for the year to 30 June 2013.

·      Sales for the year £2.47m (2012: £2.47m)

·      Operating margin 15.4% (2012: 10.5%)

·      Pre-tax profits increase by 44% to £0.40m (2012: £0.28m)

·      Contract for £1.30m awarded by SSE Contracting/PriDE for roll-out of M2G to the MOD

·      Other contract wins in the 12 months included:

Babcock Support Services (MOD), BNP Paribas Real Estate (Scottish Widows), BAE Systems Surface Ships, Carillion Services (MOD), Edmundson Electrical (Glasgow City Council), EDF Energy, Norland Managed Services (Nuffield Health) and Schneider Electric

·      Sales from Alliance Partners increased to £2.02m (2012: £1.06m)

·      Non-exclusive distribution agreement for USA and Europe signed with Fireye, Inc.

·      Net cash balance at 30 June 2013 was £1.36m (2012: £1.40m)

·      Sales pipeline of £4.61m at 30 June 2013 (2012: £9.10m)

Highlights since the year end

·      Orders brought forward and received since 1 July 2013 total £0.74m

·      Sales pipeline currently standing at c.£6.2m which includes over 90 blue chip private and public sector multi-site organisations

·      Net cash balance at 31 August 2013 of £2.01m

·      Proposed maiden final dividend of 0.25p per share

For further information:

Sabien Technology Group plc

Alan O'Brien, CEO                                                           Tel: [phone]

Gus Orchard, CFO                                                          www.sabien-tech.co.uk

Westhouse Securities                                                     Tel: [phone]

Antonio Bossi

Paul Gillam

About Sabien Technology

Founded in March 2004 by its CEO Alan O'Brien, UK-based Sabien Technology specialises in providing proven and commercially viable technology to reduce carbon emissions and energy usage for private and public organisations. Sabien Technology Group Plc floated on AIM in 2006.

The M2G is a patented energy efficient technology designed to reduce fuel consumption in commercial boilers. M2G dynamically responds to changing load demand by measuring, identifying and removing dry cycling thus maximising efficiency under all conditions.

M2G can be retro-fitted and fully integrates and complements existing controls, such as BMS, boiler sequencing, weather compensation and building optimisation controls. Using intelligent software and hardware, the M2G unit improves a boiler's efficiency by reducing energy wastage. For further information, please visit our website www.sabien-tech.co.uk.

Introduction

The Group this year has again delivered a solid performance with the full year trading performance in line with market expectations despite having made a small loss in the first half year.

Even though sales for the year were at the same level as the previous year, the operating margin increased to 15.4% and pre-tax profit at £401k was in line with market forecasts. In addition, the Group had an order book at 30 June 2013 of £0.5m which was substantially higher than in the previous year. As a result the Group is well positioned for the current financial year. As a measure of the Board's confidence in the future it is introducing a progressive dividend policy and proposes to pay a maiden final dividend of 0.25p per share.

Our Marketplace and Business Drivers

Sabien has continued to deliver its proven and trusted M2G boiler energy efficiency technology to customers that are looking for savings both in cost and CO₂ emissions within a payback period of generally less than 2 years. M2G reduces the cost of running gas and oil fired boilers and the associated carbon emissions by up to 35%.

The Group operates in a market where companies demand high standards of performance delivery including end to end project management, proven technology solutions with an estate-wide application and a record of delivering proven energy and carbon savings along with validation of the same.    

We continue to win new business with blue-chip and public sector clients, while also securing from existing clients multiple repeat orders for our M2G technology.

History and market development

Sabien was set up in 2004 to commercialise M2G, a boiler energy efficiency technology, which reduces gas and oil consumption in commercial boilers. In May 2006, Sabien acquired the Intellectual Property and all commercial rights to M2G and floated on AIM in December 2006. In March 2009, Sabien obtained Underwriters Laboratories (UL) certification which enabled M2G to be sold in the USA.

Sabien is not reliant on government subsidies for the commercialization of its M2G technology, unlike many products that are currently included in energy efficiency offerings, and is consequently not at risk of sudden changes in government policy or withdrawal of subsidies. One of the key drivers for the technology is a payback of under two years which eases access to capital expenditure budgets.

Financial results

Revenue in the year was £2.47m (2012: £2.47m). The profit before taxation was £0.40m (2012: £0.28m), an increase of 44%, and profit after taxation was £0.31m (2012: £0.52m).

The increase in profit before taxation is due to a combination of improved gross margin and a reduction in administrative expenses. The decrease in profit after taxation is due to the recognition of a notional tax charge being the utilisation of the deferred tax asset in the year compared with the initial recognition of a deferred tax asset in the previous year. The Group has available tax losses amounting to £1.2m.  In future years, the Group will also benefit from the lower rates of corporation tax introduced under the Patent Box regime as, currently, all the Group's income derives from the exploitation of its M2G patent.

At 30 June 2013, cash and cash deposits amounted to £1.36m (2012: £1.40m). The Group has no external debt.

Overview

Sabien performed well given the challenging business environment and ended the year with a record order book. This demonstrates that our customers continue to recognise the high quality and effectiveness of our M2G technology, project management and installation service offerings.

Profit before tax increased by 44% which is indicative of the Group's operational efficiency and consistent pricing model. The sales pipeline, which at 30 June stood at £4.6m, has since increased to £6.2m as at the date of this report.

The pipeline value is a snapshot at a particular date. We are always refining the pipeline and this can result in movements up or down in value. It includes both sales opportunities with an indicated order date in the future and those where we have been asked to quote but where no order date has been indicated by the client. In our preliminary update in October 2012 we had reported a sales pipeline number of £9.1m. During the period under review, we have converted £2.5m and removed c£2.0m of quotations for a number of reasons including budgetary and tender delays and tender losses. Since 30 June 2013, we have added a net c£1.6m in new quotations.

The size of the sales pipeline is a key performance indicator as it gives an indication of the level of business that could be generated over the following 6 to 24 months. Sabien's experience is that it can take between 6 to 18 months for a customer enquiry to convert to a sales order. Management of this pipeline is a key priority of the Group and experienced business development personnel have been recruited to ensure a constant growth in new business, particularly in those market segments which the Group has identified as being the ones most likely to bring in more business in the future.

We announced earlier in the year that we signed a non-exclusive distribution agreement with Fireye, Inc. based in the USA, a leading manufacturer of flame safeguard controls and burner management systems for the supply of our UL-approved M2G boiler optimisation controller. The territories covered by the agreement include the U.S., the European Union, Switzerland, China, Japan and South Africa. The agreement creates an excellent opportunity for Sabien to access major overseas markets and we would expect the agreement with Fireye to make a material contribution to our revenue performance in 2014.

The Group continues to make progress with the successful conversion of its Project 10 (P10) M2G pilots, which we have carried out over the last few years, into commercial orders. More importantly, the broadening of our UK Alliance Partner programme has again proved very successful with orders being placed throughout the year for a variety of large customers, in particular for a number of sites for the Ministry of Defence (MOD).

The CRC (CRC Energy Efficiency Scheme) scheme continues to be a key focus for our clients as they mitigate the costs of the CRC. Sabien's M2G product is specifically aimed at providing a proven effective solution to the CRC problem for organisations which are affected by the CRC legislation. In the past year, the scheme has been simplified in order to cut down on administrative costs and red tape and is now more flexible and light-touch, saving participants money and helping them to save energy. Although the performance league table has been abolished, the Government will continue to publish participants' aggregated energy use and emission data.  It has also pledged to review the effectiveness of the scheme in 2016 and to remove the tax element of the CRC as a "high priority" when public finances allow. Whilst the performance league table has been abolished, the fact that energy use and emissions data will still be published may provide some reputational drivers for the reduction of emissions.

In the Group's interim report, we stated that we anticipated delivering a full year trading performance in line with market expectations despite having made a small loss in the first half year. Even though sales at the year end were at the same level as in the previous year, operating margins improved and profitability was in line with market forecasts with the order book at £0.5m substantially higher than in the previous year.

The Group will be investing in organic product innovation on already identified new technology solutions for the heating and cooling market in the UK and overseas. Strengthening our capabilities that create value and innovation for our customers will keep us well placed to compete in an industry demanding high standards from retro-fit technology providers.

Strategy

During the past year, the Sabien executive team recognised that to build on the Group's strengths and improve its financial performance, we needed to restructure and augment the business development function in order to enhance our sales capacity. Accordingly, the Group has recruited 3 new business development managers.

We will also be investing in organic product innovation on already identified new technology solutions for the heating and cooling market in the UK and overseas. We believe that this strategy of focusing on operational and business development excellence will improve returns from the sales opportunities presented to the business. Although this strategy has led to some additional costs we expect these initiatives to materially strengthen our market position and drive our long-term sustainable profitable growth.

While we are rightly focusing primarily on the UK, we firmly believe there is a significant international opportunity for Sabien and M2G and we continue to look to grow revenues through international opportunities. Our strategic priorities are to build on our core business, to capitalise on the opportunities from existing client business, identify new business and continue to develop our indirect sales channels and where appropriate, expand our current territories and also enter new territories.

The key to our on-going strategy and future lies in our aims to:

·      Continue to focus on multi-site organisations (i.e. those with 50 or more buildings in their estate);

·      Continue to attract new customers;

·      Continue to offer our Project 10 piloting scheme;

·      Continue improving our levels of project management, customer service and technical support to help our customers get the best business case results they need from their M2G roll out programs;

·      Optimise our existing and new client sales potential by continuing to increase the level of M2G (post installation) validation information from as many relevant sources as possible;

·      Maintain and expand our network of excellent alliance partners;

·      Identify opportunities to add or acquire new products which will enter adjacent segments of the market; and

·      Extend our geographic penetration.

The objective of our strategy is to enhance shareholder value while remaining committed to maintaining our hard-earned reputation for excellence.

The Group has also identified the following key risks which could affect both the successful implementation of the strategy and future financial outcomes:

·      Downward pressure on gas prices

·      Technology developments and competitive products

·      Changes in legislation

·      Supply chain issues, and

·      Inability to meet customer demand

While some of these risks are outside the Group's control, the potential impact of the others is continuously monitored by the Group.

Project 10 (P10 - M2G piloting)

P10 is a piloting scheme, initiated in 2007, whereby we agree to install M2Gs at up to 3 sites in each of a number of large prospective customers, paid for by the client, and to monitor the results for a defined period, usually 4 weeks. At the conclusion of the pilot period, a report is produced for each customer in which the results of the pilot are presented along with an estimate of the likely levels of savings in energy and CO₂ emissions were M2G to be deployed over the customer's estate.

P10 is still available and very much part of our on-going new contract generation strategy and as the business continues to grow, many initial P10 clients continue to place further orders with us while we are also awarded new contracts as a result of successful new P10 pilots. The business focus has now widened to simultaneously mobilise nationwide M2G contracts and piloting directly with clients and indirectly with companies via our Alliance Partners.  

The Group has seen a noticeable increase in the number of M2G orders from referrals, Alliance Partners and clients that haven't required a pilot. This rise has been aided by an increase in M2G brand awareness, technology acceptance and a reputation for delivering an excellent standard of project management in the industry. The successful conversion of our P10 M2G pilots into orders and subsequent repeat orders has proven to be the main catalyst behind our increase in profitability during this financial year.

Operational progress

During the period under review Sabien continued to develop its Alliance Partner programme with £2.02m of total sales for the period coming from indirect sales channels, an increase from £1.06m in 2012. Orders were received from a number of leading UK Utility and Facility Management Companies including SSE Contracting, Babcock Support Services, Norland Managed Services, Edmundson Electrical, BNP Paribas Real Estate, Carillion Services, EDF Energy, Advanced Energy Management Systems and Amey Business Systems.

We expect further growth from all channels for the year ending 30 June 2014. The sales process for this channel requires a degree of support and technical assistance from our own business development and operations teams.  Indirect partners include major international Facility Management companies, Energy Utilities, Product Specifiers and Energy Consultants. 

We continue to participate in trade shows, exhibitions and webinars and have generated a large volume of sales prospects from these. Sabien's name continues to be increasingly recognised in the sector of energy efficiency and the number of prospects that contact us directly as a result of client referrals and our marketing efforts has increased materially.

As noted in last year's report, we continue to look at ways in which we can improve our internal operations, systems and sales and marketing capabilities. This year we invested in our core Customer Management System which enables us to develop our prospects, improve business reporting and manage the installations of M2G. Since the year end, and in line with our on-going strategy to concentrate on certain business segments, we have also recruited more sales personnel who have many years experience within the energy sector.

Overseas expansion

During the year, the Group appointed another distributor in the USA, Fireye Inc., and CCM Energy Solutions Pty Ltd as its distributor in Australia. Fireye is part of the United Technologies Group and is established as world leader in flame safeguard controls not only in the USA but also in Asia, South Africa and throughout Europe. The Group's existing US distributor, Greffen Systems, Inc., continues to sell into the US market and placed a small order with the Group during the year. Gas prices in the USA fell during the year due to the impact of fracking and prices are not expected to recover for some time and this has had an impact on M2G sales in that country. CCM Energy Solutions is a specialist consultancy that provides tailored boiler room solutions for a wide range of companies and institutions throughout Australia.

We have a clear plan for the business in Europe and the USA and we are committed to its execution. The company is continuing to receive meaningful expressions of interest from Clients, Technology Specifiers and Facility Management companies on becoming distributors for M2G in their respective geographical territories. 

The Group has no plans to open points of presence overseas. Our strategy is to appoint reputable companies with proven in-house technical expertise and experienced management with an extensive client portfolio who can make a meaningful contribution to Sabien's financial performance.

Dividend policy

As a measure of the Board's confidence in the future it is introducing a progressive dividend policy and proposes to pay a maiden final dividend of 0.25p per share.

Board, management and people

During the year, Dr Clive Morton retired as chairman and non-executive director of the Company. With effect from the date of the Annual General Meeting, Ms Miriam Maes, who had been appointed as a non-executive director on 17 October 2012, was appointed as Chairman.

On behalf of the Board, we would like to take this opportunity to thank the Sabien team for their hard work and effort as well as our shareholders, customers and suppliers for their confidence and support throughout the year.

We have a fantastic team of people who uniquely blend experience in engineering, manufacturing, project management, channel development and innovation. Our highly skilled team is capable of building on the Group's position as a leader in the manufacturing and sale of boiler optimisation controls. It is important that we continue to attract and retain the best talent.

Outlook

The Group has made a good start to the new financial year and since 1 July 2013 has received orders totalling £0.2m in addition to the orders of £0.5m already in place at 30 June 2013, all of which will be recognised as revenue in the first half of the current financial year.

The Board believes the current economic climate will continue to create significant medium and long-term growth opportunities for Sabien, both in the UK and overseas. We believe that our strategy has created a strong base from which we can continue to develop and we look forward with confidence to delivering long-term value for our shareholders.

Miriam Maes                                                                            Alan O'Brien

Chairman                                                                                  Chief Executive Officer

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2013

		2013	2012
	Notes	£'000	£'000
Revenue		2,471	2,470
Cost of sales		(699)	(753)
Gross profit		1,772	1,717
Administrative expenses		(1,391)	(1,457)
Operating profit	4	381	260
Investment revenues	5	20	18
Profit before tax		401	278
Tax (charge)/credit	6	(89)	243
Profit for the year attributable to equity holders of the parent company		312	521
Total comprehensive income for the year		312	521
Earnings per share in pence - basic	7	1.0	1.6
Earnings per share in pence - diluted	7	0.9	1.5

The arnings per share calculation relates to both continuing and total operations.

Consolidated and Company Statements of Financial Position

As at 30 June 2013                                                     Company Reg No: 05568060

		Group		Company
		2013	2012	2013	2012
	Notes	£'000	£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		76	38	-	-
Intangible assets		602	650	-	-
Investment in subsidiaries		-	-	3,601	3,601
Total non-current assets		678	688	3,601	3,601
Current assets
Inventories		200	292	-	-
Trade and other receivables		1,081	234	55	55
Deferred tax		194	283	-	-
Cash and cash equivalents		1,357	1,402	1,042	1,147
Total current assets		2,832	2,211	1,097	1,202
TOTAL ASSETS		3,510	2,899	4,698	4,803
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables		431	156	24	24
Total current liabilities		431	156	24	24
EQUITY
Equity attributable to equity holders of the parent
Share capital	8	1,574	1,574	1,574	1,574
Other reserves		200	176	200	176
Retained earnings		1,305	993	2,900	3,029
Total equity		3,079	2,743	4,674	4,779
TOTAL EQUITY AND LIABILITIES		3,510	2,899	4,698	4,803

Consolidated and Company Cash Flow Statements

For the year ended 30 June 2013

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Profit/(loss) before taxation	401	278	(129)	2,881
Adjustments for:
Depreciation and amortisation	72	61	-	-
Decrease in impairment provision	-	-	-	(3,014)
Finance income	(20)	(18)	(17)	(22)
Transfers to equity reserves	24	30	24	30
(Increase)/decrease in trade and other receivables	(847)	197	-	467
Decrease/(increase) in inventories	92	(145)	-	-
Increase/(decrease) in trade and other payables	275	(32)	-	(3)
Cash generated (used in)/from operations	(3)	371	(122)	339
Corporation taxes recovered/(paid)	-	-	-	-
Net cash (outflow)/inflow from operating activities	(3)	371	(122)	339
Cash flows from investing activities
Purchase of property, plant and equipment	(62)	(20)	-	-
Finance income	20	18	17	22
Net cash (used in)/generated by investing activities	(42)	(2)	17	22
Net (decrease)/increase in cash and cash equivalents	(45)	369	(105)	361
Cash and cash equivalents at the beginning of the year	1,402	1,033	1,147	786
Cash and cash equivalents at the end of the year	1,357	1,402	1,042	1,147

Notes to the Consolidated Financial Statements

For the year ended 30 June 2013

1.   Basis of Preparation:

The results for the year are preliminary and unaudited.

While the financial information included in this interim announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS.  The full consolidation financial statements of the Company will be prepared in accordance with IFRS, International Accounting Standards and their interpretations issued or adopted by the International Accounting Standards Board as adopted for use in the European Union. 

The directors believe that the Group is a going concern and have accordingly prepared these consolidated financial statements on a going concern basis.

The consolidated financial statements have been prepared on the historical cost basis and are presented in £'000 unless otherwise stated.

2.   Basis of consolidation:

The consolidated Statement of Financial Position and Statement of Comprehensive Income includes the financial statements of the Company and its subsidiaries at 30 June 2013. The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 June each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

Business combinations involving entities under common control fall outside the scope of IFRS and are consolidated using merger accounting under which the group incorporates the assets and liabilities of the entities at the amounts recorded in the books of the entities.  No goodwill arises on consolidation and any difference arising from the use of merger accounting is included in equity as a merger reserve.

The consolidated financial information incorporates the combined companies' results as if the companies had always been combined. 

Except as noted above, the financial information of subsidiaries is included in the consolidated financial statements using the acquisition method of accounting. On the date of acquisition the assets and liabilities of the relevant subsidiaries are measured at their fair values.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

3.   Segmental reporting

Based on risks and returns, the Directors consider that the primary reporting business format is by business segment which is currently just the supply of energy efficiency products, as this forms the basis of internal reports that are regularly reviewed by the Company's chief operating decision maker in order to allocate resources to the segment and assess its performance. Therefore the disclosures for the primary segment have already been given in these financial statements. The secondary reporting format is by geographical analysis by destination. Non-UK revenues amounted to 3% of the total and are analysed as follows:

Geographical information	Sales revenue	% of total revenue
	£'000
UK	2,386	97
Other	85	3
Total	2,471	100

During the period, sales to the group's largest customers were as follows:

	Sales revenue	% of total revenue
	£'000
Customer 1	775	31%
Customer 2	253	10%
Customer 3	248	10%

4.   Operating profit

The profit before tax is stated after charging:

	Year ended 30 June 2013	Year ended 30 June 2012
	£'000	£'000
Depreciation of owned tangible fixed assets	24	14
Amortisation of intangible assets	48	47
Operating lease rentals - land and buildings	21	24

5.   Investment revenues

	Year ended 30 June 2013	Year ended 30 June 2012
	£'000	£'000
Interest receivable	20	18

6.   Corporation tax

	Year ended 30 June 2013	Year ended 30 June 2012
	£'000	£'000
Current tax	-	-
Deferred tax	89	(243)
Total tax charge/(credit) for the year	89	(243)
The tax charge for the year can be reconciled to the profit e as follows:
Profit before tax	401	278
Tax on profit on ordinary activities at standard UK corporation tax rate of 20% (2012: 20%)	80	56
Expenses not deductible for tax purposes	6	(97)
Capital allowances in excess of depreciation	(6)	(2)
Other short term timing differences	-	93
Unrelieved tax losses	9	10
Tax losses utilised	(89)	(60)
Current tax	-	-

Deferred Tax:

A deferred tax asset has been recognised in respect of £971k of available losses brought forward (2012: £1,416k) as the Directors believe that it is probable that the Group will continue to be sufficiently profitable in the future to be able to utilise these losses. The aggregate amount of deductible temporary differences, parent company unused tax losses and unused tax credits for which no deferred tax asset is recognised in the Consolidated Statement of Financial Position is estimated at £258k (2012: £108k) which at the standard tax rate would equate to £52k (2012: £21k).

7.   Earnings per share

The calculation of earnings per share is based on the profit for the year attributable to equity holders of £312k (2012: £521k) and a weighted average number of shares in issue during the period of 31,486,511 (2012: 31,486,511).  At the year end, warrants for 1,518,356 shares and options over 2,074,410 shares were in issue.  Both have been taken into account in calculating diluted earnings per share.

8.   Share capital

	2013	2012
	£'000	£'000
Allotted, called up and fully paid
31,486,511 Ordinary shares of 5p each (2011 - 31,486,511)	1,574	1,574

Share warrants

On 7 August 2009, the Company granted 2,952,279 warrants to TVI 2 Limited, exercisable at 6.6p each over a period of five years. Subsequent to the repayment of the loan to TVI 2 Limited in October 2009, the number of warrants granted was reduced to 1,518,356 and they are now exercisable at a price of 6.42p each. These warrants represent 4.6% of the enlarged share capital including Ordinary shares potentially to be issued under the Warrant instrument.

 

END

 

 

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